Sources Of Monopoly Inefficiency

Monopoly inefficiencies in the market can be considered as monopoly disadvantages or demerits. Actually, monopoly is a harmful economic aspect since one company rule against the economy and defines the prices of the products that are not substitutable in the market. The sources of inefficiency in the monopoly market include high prices of products in the market, excess capacity to be executed by a single firm and thus, the ability to produce enough for the entire population alone, stifle competition, price discrimination and supernormal profits, as well as extremely lowered cost of production.

The monopoly market is dominated by one or two large firms and thus, they always act as determinants of the market prices. The companies in monopoly market remain dominant in the market such that the company does not care about the products quality. In this regard, they compromise the quality of the product to minimize the cost of production. Therefore, they always sell substandard products at very high prices. The fact that they are price maker in the market and that they do not experience any form of competition makes them employ unrealistic prices in the market. Monopoly market is never determined by the market forces. On the contrary, it is always determined by the company’s itself. Therefore, they always ensure that they set unrealistic prices to make abnormal profit and thus, remain strong and unshaken in the market. This enable them to continue manufacturing in bulks and being able to feed the entire population. The monopoly also gives the company the ability to create force crisis in the market so that they can take advantage of hiking prices. This makes monopoly market to be considered inefficient to the economy (Saylor 1).